Expansion Isn't In Game Plan For Nba City

CFB COVER STORY

Partner Hard Rock Cafe Called A Time Out Earlier This Year. But The Restaurant At Citywalk Still Hopes To Become A Global Player.

May 8, 2000|By Jerry Jackson of The Sentinel Staff

The high-energy TV commercial now airing for NBA City restaurant in Orlando plays up the fact that the restaurant is one of a kind - unique, a solo player.

It wasn't supposed to be that way.

When the restaurant broke ground last year, Hard Rock Cafe International Inc., NBA City's joint venture partner, called it the first of many to come - a classy, basketball-themed chain.

Jim Berk, Hard Rock's chief executive at the time, and David Stern, commissioner of the National Basketball Association, predicted that 10 or 12 of the restaurants would be opened worldwide within three or four years.

But none of that has happened. NBA City has gone from high hopes to one lonely hoop in Orlando.

Hard Rock's parent company in Great Britain earlier this year quietly pulled the plug on the ambitious plans. Rank Group PLC said it had withdrawn from the joint partnership for future development and took a one-time charge against earnings to get out of the deal.

Company officials in London said Hard Rock would continue operating the lone NBA City outlet at Universal Studios Escape's CityWalk entertainment complex as a single restaurant. But there would be no expansion to New York, Tokyo and Mexico City - sites mentioned as early candidates - and other far-flung locales.

A full-court press is now under way to try to salvage the dream, and NBA brass say they are still in the game.

Timing is everything in roundball

It seemed like a match made in marketing heaven: The chain would be run by Orlando-based Hard Rock, the granddaddy of theme restaurant operators, and would leverage the marketing muscle and growing international appeal of the NBA.

With interactive games and a line of NBA merchandise to pad profit margin, the restaurants would have all the advantages of a popular theme restaurant without the expense that often accompanies theme outlets, such as costly memorabilia.

Wherever Hard Rock operates - and it has more than 100 restaurants in 35 countries - opening an NBA City would make economic sense, the reasoning went. From the tip-off, the restaurant would have an advantage in everything from joint ordering of food and supplies to synergy in management and record-keeping.

But reality intervened. Industry analysts and financial reports published by Hard Rock's parent company indicate that the fast-break plans for NBA City collided with fiscal hard times at Rank Group.

The UK-based leisure company, which owns Hard Rock, casinos, hotels and holds a large stake in Universal Studios Escape in Orlando, has been struggling to boost its bottom line. Rank's investment in Universal, for example, has been a significant financial strain for the holding company, according to Rank's financial reports.

During the second half of 1999, at the very time Orlando's NBA City was being built, Universal's operating profit plunged from the same period in 1998.

Rank executives have been looking to unload their stake in Universal for some time, and last month officials in London repeated that goal with something of a sense of urgency.

``In particular, we remain hopeful of a sale of our 50 percent holding in Universal Studios Escape,'' the company said in its update report to analysts and investors during its annual meeting.

The company made more positive comments about the Hard Rock portion of the business, noting that same-unit sales, a key measure of health for a chain, continued to improve. Without citing specific numbers, the company said that ``results are ahead of last year, reflecting the operational improvements initiated in the second half of 1999.''

Still, Hard Rock's performance in 1999 was not as good as Rank executives had hoped, and the timing was bad for the launch of NBA City.

Rank's financial report showed Hard Rock's operating profit down more than 10 percent for the year, and the parent company said that its strategy of focusing on Hard Rock's own core restaurant operation would take precedence over ``the pursuit of diversification.''

NBA City, in other words, was a distraction.

As a consequence, the company said, it was withdrawing from the NBA venture, at least for the development of future sites.

Although specifics of the agreement have never been spelled out, Rank did clarify that the deal with the NBA ``required the [Rank) Group to finance and build up to 10 NBA City restaurants worldwide over the next four years.''

At about $10 million per restaurant, it was a price the company clearly felt it could not afford to pay.

But NBA City restaurant executives were in New York last week huddling with league officials, and said they came away optimistic about the prospects of expanding it into a chain.

``The NBA is still committed to developing this around the world,'' said NBA City spokesman Chris Havlicek, son of retired Boston Celtic star John Havlicek, a member of the NBA Hall of Fame. ``We're talking to investors about picking up where Rank left off. There's no shortage of folks who are interested.''